The competition for subscription-based streamers is intense, with many services to choose from, such as Hulu, Amazon Prime, Disney+ and MAX.
As a result, these streaming platforms have turned to creating original content to keep subscribers happy.
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For example, Netflix, the global leader in subscription-based streaming entertainment services, has been thriving in the sector this year, partly because of its original content, including "Bridgerton S3," which hit 98.5 million views, "Baby Reindeer" which received 88.4 million, and "The Roast of Tom Brady" which reported 22.5 million as of Jul. 14.
Netflix's dedication to developing its own content has earned the streamer 107 Emmy nominations this year, with 24 total awards won across multiple titles.
Netflix Q2 earnings guide the upcoming release
Netflix's (NFLX) latest earnings report for 2024 suggests reasons for optimism in its upcoming third-quarter earnings.
The company last reported earnings per share (EPS) of $4.88, reflecting a yearly 48% increase while beating analysts' expectations of $4.74.
Its revenue was up nearly 17% compared to the year prior, mainly due to growth in paid memberships. Global paid memberships increased 16.5% in Q2, with ads-tier memberships up 34% quarter on quarter.
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Netflix attributes a large part of its subscriber growth to cracking down on password sharing and introducing advertising (ads) into its streaming services.
The implementation of ads allows Netflix to offer lower-priced subscriptions to consumers, which now account for over 45% of all sign-ups in its ads market.
The company's ad revenue has increased steadily each quarter, and analysts expect it to surpass $1 billion.
Netflix's last price spike in the U.S. was announced in October 2023. It only affected the Premium and Basic tiers, which went up $2, leaving the ad-based tiers untouched.
Nonetheless, the ads business has proven successful for Netflix as it reported a 150% increase in upfront ad sales commitments over 2023, which aligns with its expectations.
"Given Netflix’s low cost per viewed hour, we see scope for the firm to raise U.S. prices by 12% in 2025," said Citi analyst Jason Bazinet.
Despite higher prices, Netflix is still more affordable than Diney+ and Max, which could explain why subscriber numbers have been steadily increasing globally, reaching over 277 million as of July.
In this year's first-quarter earnings, Netflix announced it would stop reporting subscription numbers in 2025 to focus on financial metrics that benefit investors more.
“Netflix is clearly the dominant paid global streaming player for the foreseeable future with the ability to generate solid subscriber growth and average revenue per user (ARPU) growth, given its already massive scale continues to expand margins and generate large healthy free cash flow growth, a powerful combo,” said Pivotal Research Group analyst Jeff Wlodarczak.
Netflix analysts offer optimistic expectations
Netflix and analysts have similar predictions for the upcoming Q3, but analysts seem to have slightly more faith than the company.
The streaming giant is scheduled to report its third-quarter earnings after the closing bell on Thursday, Oct. 17.
The company last missed analyst predictions when it reported its fourth-quarter 2023 results but has surpassed expectations every quarter since then.
This upward incline has influenced analysts to deliver optimistic numbers, predicting mainly positive revenue, profit, and subscriber growth for Netflix.
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Netflix predicts revenue growth of 14% year over year for the upcoming quarter, which is slower than the previous two quarters of 2024.
On the other hand, analysts expect a slightly higher number, predicting a 14.3% increase.
Netflix forecasted EPS of $5.10, while analysts expect an EPS of $5.11.
Netflix's stock has fallen by 3.5% over the last five sessions heading into Thursday's after the bell print, but it has increased by nearly 98% from a year ago.
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